Interesting article in Bloomberg today

“Canadian Finance Minister Jim Flaherty plans to introduce legislation as early as tomorrow
that may contain changes to the oversight of Canada Mortgage &
Housing Corp. and rules governing covered bonds.

The government said yesterday it plans to introduce a law
“to implement certain provisions of the budget,” according to
a document known as the Notice Paper. Under parliamentary rules,
the legislation can be introduced in the House of Commons as
early as tomorrow.

In his March 29 budget, Flaherty said the government will
introduce “enhancements to the governance and oversight
framework” for CMHC, which insures mortgages and guarantees
mortgage-backed securities issued by banks.

Asked about the potential role of the Office of the
Superintendent of Financial Institutions in overseeing CMHC,
Flaherty told reporters “I’ll talk to you about that tomorrow.
Tomorrow’s Thursday, right?”

The International Monetary Fund has called on the federal
government to review the agency’s governance and oversight, and
assess whether the agency needs to do more to protect itself
against housing market risks.

The government is considering whether OSFI, the banking
regulator, can play a role in “strengthening the oversight of
CMHC’s commercial operations,” Chisholm Pothier, Flaherty’s
chief spokesman, said in an e-mail April 3. Pothier declined to
comment today on the government’s plans.

Covered Bond Legislation

Flaherty also said in the budget that he would introduce
legislation to govern covered bonds, fixed-income securities
sold by banks using pools of mortgages as collateral. The
federal government guarantees the full value of mortgages
insured by CMHC and 90 percent of loans insured by private

The Finance Department said in a May consultation paper it
was considering whether the law should encourage banks to secure
covered bonds with uninsured mortgages. If Canada barred banks
from securing covered bonds with government-insured loans, it
would raise costs for covered bonds because issuers would need
to pledge more collateral to gain AAA ratings.

Canadian banks increased issuance of covered bonds this
year before Flaherty’s fiscal plan. The lenders sold $12.6
billion in covered bonds in the December-March period, compared
with $6.6 billion in the same period a year earlier, according
to data compiled by Bloomberg.”

Mark Fidgett is a Vancouver mortgage broker and the driver behind

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